The average interest rate on all refinanced student loans rose slightly last week, according to Credible. Still, student loan rates are relatively low, so you may want to consider refinancing your student loan today.
Interest rates on private student loans are tied to a variable index rate and the borrowers’ credit scores. Lenders base rates on a 1- or 3-month average of the index rate.
As a result, student loan rates may not rise as fast as the fed funds rate, says Mark Kantrowitz, president of PrivateStudentLoans.guru.
“Lenders may also be waiting to see where interest rates on federal loans will start in July, for competitive reasons, for example, to try to drive down the price of Parent PLUS loans,” says Kantrowitz. “Lenders are also aware that the payment pause and interest waiver and the prospect of broad student loan forgiveness are acting as a drag on the private refinancing market.”
Kantrowitz expects rates to start rising in June.
5-Year Variable Student Loan Refinance Rates
The current rate for 5-year variable undergraduate refinanced student loans is 4.12%, up 0.28% from two weeks ago. Six months ago, this rate was much lower, at 2.79%.
Variable rates for five-year graduates also increased slightly from two weeks ago. Currently, the average rate is 3.57%, compared to 3.37% the previous week.
Fixed 10 Year Student Loan Refinance Rates
Refinance rates on 10-year fixed student loans increased slightly last week from two weeks ago, with rates for college students rising 0.13%. Rates on college student loans increased 1.08% from last year.
Graduate loans have barely budged for two weeks, rising 0.04%. They have risen 1.21% since last October.
Student loan interest rates by credit score
The rate you receive when you refinance your student loan is significantly affected by your
. Generally, the better your credit score, the lower your rate. Below, you’ll find fixed 10-year student loan rates by credit score:
What is the benefit of refinancing a student loan?
Refinancing your student loan may qualify you for a better rate than what you currently have. You also have the ability to change from a variable rate loan to a fixed rate loan, or change the length of your term. By selecting a different term length, you may be able to spread payments over a longer period for smaller monthly payments, even though you’ll pay more in total interest.
How is a student loan refinanced?
To start refinancing, research different companies and check their terms with each lender. Review the details of each offer and find out which rate and term length is best for you. When you check your rates, lenders often do a soft credit check, which doesn’t affect your credit score.
You will need to apply for refinancing through a private student loan lender, as you cannot refinance a student loan through the federal government.
Once you’ve chosen a company, you’ll complete your application and provide documents that verify your finances and identity. After the lender gives you their final offer, you’ll need to agree to the terms and sign on the dotted line. Your new lender will then pay off your existing loan and you’ll be ready to take out a new loan.
How do I choose between a 5-year and a 10-year loan?
Both types of loans are suitable for different types of borrowers.
If you want a lower interest rate and can pay off your loan faster, a 5-year loan term might be a great option. You’ll save money on interest and free up money for your other financial goals more quickly.
A 10-year loan term will cost you more overall, but will make smaller monthly payments. This can make it easier for you to pay off your loan if you’re on a tight budget.